Greek austerity protesters clash with police

Protests in Athens ended today after police fired tear gas in response to fire-bombs thrown by demonstrators during a strike over wage cuts and austerity that Prime Minister Antonis Samaras said are vital to keep the euro.

Demonstrators earlier filled central Syntagma Square in Athens, opposite the Parliament House, shouting slogans such as “struggle, clash, overturn: history gets written by those who disobey.” Police spokesman Takis Papapetropoulos estimated the crowd at 35,000 people. Police said 105 people were detained, 21 were arrested and 8 officers were injured.

Greek government spokesman Simos Kedikoglou, speaking in a phone interview, acknowledged that the strike was a significant protest while saying Greeks understand the government is moving in the right direction and a majority want to keep the euro.

Schools, hospitals, ferries and government services shut down in the first walkout since February. Shops closed from 3 p.m. today to let staff take part in demonstrations. Public transport operated to allow protesters to attend rallies in Athens city center. A three-hour walkout by air traffic controllers disrupted flights around the country.

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“The strike marks the beginning of what is likely to be a tough time for Samaras as demonstrations and industrial action heighten in the weeks ahead,” said Wolfango Piccoli, an economist at Eurasia Group in London. “Samaras should be mainly concerned about how much time he has left to tackle all these interrelated challenges.”

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The shutdowns, called to protest the cuts to benefits, wages and pensions that will form the bulk of an 11.5 billion- euro ($US14.8 billion) austerity package, comes as speculation swirls anew about Greece's finances. International Monetary Fund Managing Director Christine Lagarde said on Sept. 24 that the financing gap won't be solved by the savings because a weak economy and delayed asset-sales worsened Greece's finances.

Athens, the capital, has been wracked with demonstrations by groups ranging from police officers to parents of three or more children in the past week as Finance Minister Yannis Stournaras remained locked in talks with officials from the European Union, the IMF and the European Central Bank.

The inspection of Greece's finances by the so-called troika will resume on Sept. 30 after a week's pause. Samaras and Stournaras agreed on the package, which includes 2 billion euros in revenue raising measures, Kathimerini newspaper reported today, without citing anyone.

Stournaras is to brief the two leaders of the coalition parties supporting Samaras later today, a Finance Ministry official said. The package will be submitted to parliament next week, Kathimerini said.

The efforts to find the savings by Samaras's three-way coalition, which took power following June 17 elections, still won't be enough to put back on track the 130 billion-euro bailout, Lagarde said.

The IMF has indicated that any additional financing for Greece will have to come from Europe, where officials have told Samaras no discussion can be held on debt relief or on extending the time to implement measures until he honors pledges made for the country's second rescue package. The coalition agreement includes pushing to spread the austerity measures over four years rather than two.

Needing Support

“If the coalition is united, it can extract some concessions from the official lenders, otherwise the negotiation will ultimately fail,” said Riccardo Barbieri, the chief European economist at Mizuho International in London. “It looks like they are not totally behind the finance minister's proposals due also to strong popular opposition.”

Samaras, 61, and his New Democracy party forged an alliance with the socialist Pasok and Democratic Left as two inconclusive elections in May and June threatened to tip the country into an uncontrolled financial collapse and out of the euro area.

Agreement from the troika is imperative to allow the release of 31 billion euros under Greece's financing plan. That payment is designed primarily to recapitalize the nation's banks in a bid to boost liquidity in a cash-starved economy.

The prime minister has been denied the political backing he needs for the package twice from his coalition partners.

Recession

Pasok leader Evangelos Venizelos, a former finance minister, and Fotis Kouvelis of Democratic Left both balked at signing off on some 7 billion euros worth of wage and pension cuts in a country gripped by a fifth year of recession and with nearly a quarter of the workforce unemployed.

“The political backdrop will worsen as a result of the mounting tensions within the ruling coalition over the troika- demanded austerity package,” said Piccoli at Eurasia. “Some defections during the parliamentary vote are expected but the coalition government will maintain its majority.”

With New Democracy holding 128 of the Greek Parliament's 300 seats, Samaras relies on Pasok's 33 seats and Democratic Left's 17 to secure parliamentary approval of any pledge made to international lenders.

Opinion polls since the June election have shown anti- bailout party Syriza, which has vowed to renege on all pledges made to the EU and IMF, and New Democracy tying for first place if elections were to be held again.

Museum Guards

Polls show continued dissatisfaction with economic policies. More than 57 per cent said the country shouldn't keep to pledges made in exchange for the bailout as the policies have failed, compared with 40 per cent who said it should stick to its commitments, according to a Metron Analysis poll for Ependytis newspaper.

That was reflected nationwide today. Workers joining the strike included guards at museums and archaeological sites, as well as teachers and nurses.

International lenders held back funds pledged under two rescue packages totaling 240 billion euros in the wake of the election impasse, which derailed reforms, halted state-asset sales and stoked concerns about Greece's euro status.

Opposition to reforms is “particularly difficult to overcome in a market environment where sentiment might be against you or in an economic environment where times are extremely tough,” said Lucy O'Carroll, chief economist at Scottish Widows Investment in Edinburgh. “And Greece is absolutely up there in the scale of all-time recessions.”